Capital Gain

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This discussion explores the capital gains tax implications of selling a restaurant business and its associated tenancy rights. The original poster sought to use Section 54EC capital gains bonds for tax relief but learned it's restricted to land or building transfers. Advice suggests estimating the tenancy right's value and investing that portion in 54EC bonds. It was also clarified that selling as a sole proprietor to a partnership doesn't qualify for Section 47 exemption, meaning capital gains tax is likely payable.

Sam

Sam (Querist)

20 January 2021 I have sold my restaurant business and also the tenancy right of the premises. There was only one agreement made between the purchaser and seller , agreement for sale of business and transfer of tenancy right. In consideration for the transfer of business along with tenancy right I have received the final amount. So what will be the tax implications. I thought that I can invest in 54ec capital gain bonds, but the deductions u/s 54ec is restricted to only transfer of land or building or both. How can I save tax ? Where can I invest ? How will the capital gains be calculated ?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

21 January 2021 Tenancy rights related to land and building so estimate the amount related to it and invest it in 54EC bonds and claim exemption.

Sam

Sam (Querist)

22 February 2021 I was the sole proprietor of the business, those who acquired the business now running it as a partnership. So does section 47 applies here and its not regarded as transfer? In that case there will be no capital gain right ?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

23 February 2021 Section 47 will not apply here capital gains tax payable.

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